Dollar Gains Versus Most Peers on Haven Demand as Mubarak Quits

The dollar traded near a one-month high against the yen before a U.S. report forecast to show consumer confidence improved this month, increasing the allure of assets in the world’s largest economy. Photographer: Seokyong Lee/Bloomberg

Feb. 11 (Bloomberg) -- The dollar rose against most of its
major counterparts as Egyptian President Hosni Mubarak stepped
down and handed power to the military, stoking demand for the
safety of U.S. assets.

The greenback gained for a third week versus the euro as
Mubarak bowed to the demands of protesters, who are likely to
call for immediate elections. The euro remained lower today
against the dollar as the head of Germany’s central bank
resigned and U.S. consumer confidence rose this month.

“It’s concern about the military still being in charge and
does this spread to neighboring countries in the Middle East,”
said Paresh Upadhyaya, head of Americas G-10 currency strategy
at Bank of America Corp. in New York. “There are worries about
instability.”

The dollar strengthened 0.4 percent to $1.3554 per euro at
5 p.m. in New York, from $1.3603 yesterday, when it rallied 1
percent. The greenback gained 0.2 percent this week against the
common currency. The dollar advanced 0.2 percent today to 83.43
yen. The euro declined 0.1 percent to 113.06 yen.

“Mubarak has decided to waive the office of the
presidency,” said Vice President Omar Suleiman in a statement
on state TV today. “He has instructed the Supreme Council of
the armed forces to take over the affairs of the country.”

Protests in Egypt, inspired by the revolt that ousted
Tunisian President Zine El Abidine Ben Ali on Jan. 14, sparked
concern that tension would spread in a region that holds more
than 50 percent of the world’s known oil reserves.

Canadian Dollar

Canada’s dollar rose against all of its 16 most-traded
peers as the nation unexpectedly posted its first trade surplus
in 10 months and the U.S. trade deficit widened 5.9 percent to
$40.6 billion, in line with forecasts. The Canadian currency
climbed 1.1 percent to C$1.3393 per euro.

Mexico’s peso was the second-best performer, appreciating
0.4 percent to 12.0270 per greenback.

The euro remained lower versus most major peers after the
German government said Bundesbank President Axel Weber will
leave office on April 30. A successor will be named during the
next week, Steffen Seibert, a government spokesman, said after
Weber met in Berlin with Chancellor Angela Merkel.

The decision takes Weber, 53, out of the race to succeed
Jean-Claude Trichet as president of the European Central Bank
when Trichet’s term expires on Oct. 31. The German official is
leaving for “personal reasons” after deciding to step down on
Feb. 8 and then being asked by Merkel to postpone the
announcement, the Bundesbank said.

‘Outspoken Hawk’

Weber is “the most outspoken hawk on the ECB” and his
exit would probably lower the likelihood of aggressive interest-rate boosts, Todd Elmer, Singapore-based head of Group-of-10
currency strategy for Asia excluding Japan at Citigroup Inc.,
said yesterday in a Bloomberg Television interview.

IntercontinentalExchange Inc.’s Dollar Index, which tracks
the greenback against the currencies of six major U.S. trading
partners, climbed as much as 0.6 percent to 78.697, the highest
level since Jan. 21. The gauge rose 0.5 percent this week in its
first five-day rally in five weeks.

The dollar was gained 1.6 percent for the past five days
versus the yen, its biggest weekly rise since Jan. 7. It touched
83.68 yen today, the strongest level in five weeks.

The Thomson Reuters/University of Michigan preliminary
index of consumer sentiment rose to 75.1, the highest level
since June, from 74.2 in January, in line with the median
forecast of economists in a Bloomberg News survey.

‘Decent-Sized Move’

The greenback strengthened beyond $1.35 per euro for the
first time since Jan. 21, gaining 0.8 percent to touch $1.3497.

“The reason we’re seeing a decent-sized move like this is
because the outlook in the U.S. is better,” said Jens Nordvig,
a managing director of currency research in New York at Nomura
Holdings Inc. “We’re really pricing in a Fed exit from zero
interest rates in the next year.”

The Federal Reserve has kept its key interest rate at zero
to 0.25 percent since December 2008 to support economic growth.
Analysts forecast the central bank will raise the rate to 0.5
percent by year-end, according to a Bloomberg News survey.

The U.S. unemployment rate dropped to 9 percent and
manufacturing and service industries grew in January, data from
the Labor Department and the Institute for Supply Management
showed last week.

The U.S. currency strengthened the most over the past week
in a basket of 10 developed-nation currencies, gaining 0.9
percent, according to Bloomberg Correlation-Weighted Currency
Indexes. The Swiss franc dropped the most, 1.2 percent.

Aussie Weakens

Australia’s currency slid below parity with the dollar
today after Reserve Bank Governor Glenn Stevens said in
parliamentary committee testimony that policy makers judged it
“sensible” to keep interest rates on hold. Traders cut bets on
the amount rates will be increased over the next 12 months to
0.35 percentage point, from 0.41 yesterday, according to a
Credit Suisse Group AG index based on swaps.

Australia’s currency fell 0.2 percent to $1.0023, from
$1.0044. It dropped as much as 0.8 percent to 99.61 U.S. cents,
the lowest level since Jan. 31.

South Korea’s won was the worst performer among the
greenback’s major counterparts after the central bank
unexpectedly held off from raising interest rates. It touched
1,128.70 per dollar, the weakest level since Jan. 11.